AARRR Framework - Grow your startup with pirate metrics (Step-by-Step Guide)

The AARRR framework is one of the strongest frameworks to grow your startup and increase revenue. It's also called pirate metrics.

Let me show you how you can use it in your startup right now, step by step.
It basically works like this: It splits your customer lifecycle into 5 stages:

• Acquisition
• Activation
• Retention
• Referral
• Revenue

And in each stage, you measure very specific metrics.
That's how you find out which part of your startup you need to fix.

Now, the key is this: You don't fix all five at once.
You find your weakest stage and fix that first. I want to make this super easy to follow, so let's say I have just built a new startup.

If you want all of this on one page, so you don’t have to remember all the metrics and pro tips to grow your startup - I made a quick cheat sheet for you with the five stages. You can download it right here:

The first step - that's what the A stands for - is Acquisition.
I want to get customers.

The big question I need to answer is:
How can I make people find my product?

But the key is not to try 10 different channels right away.
Not Instagram, emails and sales calls all at the same time.
I want to focus on one channel that actually brings in new customers.

And I watch 1 metric: conversion rate per channel.
I want to measure how well each channel works.

So let's say I run ads and I post on Instagram to get my first customers.
After a month, the ads brought me 1,000 signups. Instagram only 200. Easy, right? Ads win.

But wait a moment.

When I look at who actually pays - of the 1,000 signups from the ads, 10 pay. And of the 200 from Instagram, 20 pay. So the channel that looked five times smaller brought me twice the customers.

So, I don’t just count the signups.
I follow every channel all the way to paying customers.
I give each channel a few weeks, compare them, and just focus on the winner.

Ok, so I got my first users.
Now comes the second A - Activation.

Most of the people who sign up never get to the point where the product clicks for them. The point where they say "This is exactly what I wanted".

And that’s an issue because if they never get to this point - sooner or later they will just leave. So, my job is to get them to this point as fast as possible.

Let me tell you what happens if you don't. A founder I coached in my mastermind built a focus app. And he had three onboarding screens before anybody could even use his app. His activation rate was terrible.
Only about 8% who signed up really used his app.

So, we sat down and asked - screen by screen: do we really need this?
In the end we cut all three.

And you won't believe what happened:
Activation went from 8% to 24% in about a week.

So, the metric you look at here is your activation rate:
What percentage of the people who sign up reach that "I need this" moment.

If many people leave immediately, you can fix it like this:
Open a spreadsheet and at the top write down this big "This is what I wanted" moment for your product - the reason why people signed up.

Then below that, list every step between signup and that moment.
And for each one, ask: do I really need this one to get people there?

→ Yes, keep it.
→ No, cut it.

But getting people to that moment only solves half the problem.
Because even after that, people can still leave later.

People are using my product.
But when I look at my numbers, every month more customers leave than sign up. That's the first R - Retention.

So, the question is:
How do I get people to stay?

And I'll be honest. I didn't understand how important retention was in the beginning. Let me show you something. Imagine a little bucket. That's your startup.

At the top, you pour in some water. The new users that sign up for your product every day. The bucket fills up more and more, and that's good.
But let's say your bucket has a couple of holes. That's the people who leave every day. Now, as long as you only have a couple of holes, it's not that big of a deal, right? I mean, more people are coming in than are leaving.

But when you get more and more holes, then you have a problem.
And that's exactly what happens to your startup. When you only focus on new users and ignore the ones who leave, sooner or later you won't have any users left.

I made this mistake and it cost €22k in lost revenue.
Because I just let people go.

So the number to watch here is monthly churn.
And it's simple - say I have 100 customers, and 5 of them cancel.
That's 5% churn.

What’s a good number?
Well, it really depends on who you sell to and what you charge.
As an early-stage startup you usually lose about 3 to 7% of your customers every month. Below 3% is really good.

The best tip to reduce churn - and it’s crazy because most founders don’t even think about this - just ask people why they left - and then improve your product. I did that, and people told me things I could easily fix, like they didn't find a feature that was already in my product.

That's how you fix your leaky bucket.

Once people stay, the question is:
How can I get them to invite other people?

That's the second R: Referral.

When your happy users recommend your product, you get more users, because people trust a recommendation from someone they know.

But let me be honest: this only works if people actually like your product.
If your activation and retention are weak, nobody will recommend you.

The numbers I look at are:
How many users send a recommendation, and how many of the people they bring actually become customers.

But how do you get people to recommend your product?

I want to show you a great example - I really like this one - Dropbox did it.
Dropbox is a service where you can upload and share your files.

When you invite a friend, both - you and the person you referred - get extra storage. And extra storage is exactly what you want.
That's why it worked so well.

And you can just copy that strategy in your startup.
But there are 2 things to make this work:

First, you need to ask at the right moment. Right when a user has achieved something - like when they have finished a task for example.
Never interrupt them while they're working.

And second, make it worth it. Don't give people useless badges or stickers nobody wants. Give them something they really care about. Like the extra storage in the Dropbox example, a free month, or 30 days of the pro plan for free.

Here's a pro tip - in the beginning, you don't need a complicated referral funnel. Just find out your top 5 users - the people who use your product the most, send them an email and ask them if they know anybody who would find your product valuable too.

Free users don't pay your bills, do they?
People are using my product and recommending it, but if they all stay on the free plan, I still don't have a business.

So, the last R stands for Revenue.

The number here is free to paid. Out of everyone on my free plan or trial, how many become paying customers?

So how can I get more people to upgrade?
The key is to ask for an upgrade at the right moment.

Many founders I have coached just send an email after a couple of days and say "Hey, do you want to upgrade to pro?".

Well, no.
Nobody upgrades from that.

The better way is to send a personalized email after someone has seen the value of your product. Like, when they've tried your feature and it worked. And don't just say "Upgrade to the paid plan".
Send an email that shows what they get when they upgrade.

Like, ...

Hi David,
You just created your first report. Well done!
On the free plan you can create up to 3 reports.
On the paid plan you can create unlimited reports and it’s all automated -
so you don’t have to do it manually.

Happy to give you 1 month for free so you can try it.  
You can upgrade right here [link]

If something's unclear, just reply to this email.
Happy to help,
[Your name]

That’s how you can make people upgrade.

So, these are the 5 stages of the AARRR framework.
But how do you find your weakest stage right now?
How do you know what to fix first?

Remember the bucket? I'm looking for the biggest hole.
So here's how I'd do it:

I take 100 people who signed up a few months ago and ask:

• How many of them reached that moment in the first week?
• How many are still there today?
• And how many pay?

Let's say out of 100 signups, only 15 reach that moment.
12 of those stay.
And 6 pay.

Where's my biggest hole?

Right at the start, 85 people never get there.
That's activation, and that's what I fix first.
I don’t run ads and I don’t build more features.

So, find the biggest hole, fix that one stage, and measure again in a month. And if you don't have these numbers yet, that's your first step.
Start measuring.

Now, if you want help growing your startup, that's exactly what we do in my startup mastermind. I'll actually look at your product, tell you where people are dropping off, and you get direct coaching from me to fix it.

You can join right here: